SERBIA Jovan Miljkovic Senior Investment Advisor Facts and Opportunities Serbia Investment and Export Promotion Agency PRESENTATION RIGHTS RESERVED. COPYRIGHTS SIEPA. YEAR 2011.

Serbia Investment and Export Promotion Agency PRESENTATION RIGHTS RESERVED. COPYRIGHTS SIEPA. YEAR Position and Connections

Serbia Investment and Export Promotion Agency PRESENTATION RIGHTS RESERVED. COPYRIGHTS SIEPA. YEAR Investment Framework The Interim Trade Agreement between Serbia and the European Union enables customs-free export of all products originating from Serbia which are completely produced in Serbia or use materials originating from EU countries, Turkey, or countries in the EU accession process, provided that such products have undergone sufficient processing in Serbia. The free trade agreement with the Russian Federation makes Serbia particularly attractive to foreign investors and manufacturers since Serbia is the only country outside the Commonwealth of Independent States that enjoys customs-free trade with Russia. Goods produced in Serbia, or whose prevailing value is added in Serbia (at least 50% of ex works price of goods) are considered of Serbian origin and are subject to a 1% customs rate when entering the Russian market. The list of products excludes passenger cars, but automotive parts, trucks and buses can be exported at 1% customs rate. The CEFTA (Central European Free Trade Area) agreement includes the following countries: Albania, Bosnia-Herzegovina, Croatia, FYR Macedonia, Moldova, Montenegro, Serbia and the United Nations Interim Administration Mission in Kosovo. The Agreement stipulates accumulation of products origin, meaning that products exported from Serbia are considered of Serbian origin if integrated materials originate from any other CEFTA country, provided that such products have only undergone minimal processing, i.e. if the value added outside of Serbia is less than the value of the materials used in Serbia.

Serbia Investment and Export Promotion Agency PRESENTATION RIGHTS RESERVED. COPYRIGHTS SIEPA. YEAR Investment stability - Coping with Global Crisis Improved country ratings despite the external shocks OECD ranking, in Q1 2010, from classification 7 to 6 Dun & Bradstreet, March 2010, from “high risk” DB5a to “moderate” DB4d Fitch Ratings, November 2010, from BB- negative to BB- stable Standard & Poor’s, March 2011, from BB- to BB

Serbia Investment and Export Promotion Agency PRESENTATION RIGHTS RESERVED. COPYRIGHTS SIEPA. YEAR Investment stability - Coping with Global Crisis The first country in the region recovering from the crisis Average GDP growth rate GDP growth rate Bulgaria5,6-4,90,42,6 Romania6,2-7,1-1,91,1 Hungary3,4-6,71,32,0 Serbia5,4-2,91,93,0 Croatia4,5-5,8-1,32,0 Slovenia4,4-8,11,01,7

Serbia Investment and Export Promotion Agency PRESENTATION RIGHTS RESERVED. COPYRIGHTS SIEPA. YEAR On the road to EU The Financial Times FDI Magazine selected Belgrade as the City of the Future in southern Europe The World Bank improved the country’s position in the global business climate rankings The European Bank for Reconstruction and Development (EBRD) named Serbia a leader in economic growth in South East Europe The International Monetary Fund concluded a 3-year financial arrangement with Serbia SAA with the EU signed in April 2008; The country officially ratified the new free trade agreement between South East Europe countries (CEFTA) envisaging the abolishment of import duties for industrial and agricultural products Serbian Governments allocated significant, non- refundable funds to financially back new Greenfield and Brownfield projects in manufacturing, services and R&D Economic stability was maintained with robust GDP growth, balanced public finance and reduced foreign public debt The latest PricewaterhouseCoopers EM20 Index of attractive emerging markets rates Serbia as the third most attractive location for manufacturing and seventh most attractive location for services worldwide E&Y European Investment Monitor ranked Serbia as a countries with largest percentage increase in the number of FDI project with 174% surge in 2007 compared to 2006 Serbia implements one-stop shop system which enables company start-up in only 5 days, instead of the previous 23 days Serbia signed FTA with Russia, Belarus, Turkey and EFTA, it is expected to sign preferential agreements also with Ukraine and Egypt in near future Serbia’s application for the WTO was accepted; accession is planned for 2010 Candidacy for EU is expected by the end of 2011

Serbia Investment and Export Promotion Agency PRESENTATION RIGHTS RESERVED. COPYRIGHTS SIEPA. YEAR Legal Framework National treatment of foreign enterprises Freehold ownership on land and buildings Fast and cheap incorporation procedures Free withdrawal of profits and equities Support along the way..

Serbia Investment and Export Promotion Agency PRESENTATION RIGHTS RESERVED. COPYRIGHTS SIEPA. YEAR Investment Framework Tax Regime Serbia’s tax regime is highly conducive to doing business. Corporate profit tax is the second lowest in Europe, while VAT, salary tax, and social insurance contributions are among the most competitive in Central and Eastern Europe.

Serbia Investment and Export Promotion Agency PRESENTATION RIGHTS RESERVED. COPYRIGHTS SIEPA. YEAR By investing in Serbia, businesses can take advantage of a wide array of investment incentives. In addition to credit support provided by State Development Fund, the National Employment Service offers a variety of state subsidies for both new employment and job training. The tax incentives available in Serbia are also among the most competitive in the region. Tax incentives  A 10-year corporate profit tax holiday for investments over 8 million EUR in value employing at least 100 employees,  Corporate profit tax reduction up to 80% of fixed assets investment,  Corporate profit tax reduction of 100% of gross salary for new employees,  A 5-year corporate profit tax holiday for concessions,  Carrying forward of losses over up to 10 years,  Accelerated depreciation of fixed assets,  Salary tax exemptions for hiring certain categories of workers on a permanent basis,  Social insurance charges exemptions for certain category of workers hired on a permanent basis,  No double taxation,  Customs-free imports of equipment based on foreign investment. Other incentives  State Development Fund provides loans under favorable conditions (lower interest rate than referent interest rates in the banking market); approximate 2% annual interest rate.  The Regional Employment Program includes grants for full time employment of at least 5 unemployed persons, offering them a permanent contract.  The Employment Through Severance Pay Program provides grants for employment of persons whose employment contracts were terminated due to technological, economical or organizational reasons starting from September  The Apprentice Program includes state grants for professional training of the following categories of apprentices: apprentices holding high school degrees, apprentices holding college degrees and apprentices holding university degrees.  The Retraining Program is organized by the National Employment Services at companies’ request provided there are no unemployed from specific professions registered with the Service or they lack professional skills required by the company. Tax and other Incentives

Serbia Investment and Export Promotion Agency PRESENTATION RIGHTS RESERVED. COPYRIGHTS SIEPA. YEAR The unemployment rate in Serbia is largely affected by the privatization process and the creation of new jobs through Greenfield investments. On one hand privatization process generally has the effect of increasing unemployment through reduction of excess workforce that existed in state-owned companies. In contrast, the Greenfield investments are the creators of new direct jobs. NET SALARYGROSS SALARY 25,000 RSD (250 EUR) 41,037 RSD (400 EUR) 40,000 RSD (400 EUR) 66,266 RSD (650 EUR) 60,000 RSD (600 EUR) 99,903 RSD (1,000 EUR) Net vs. Gross Salary Salaries and Unemployment

Serbia Investment and Export Promotion Agency PRESENTATION RIGHTS RESERVED. COPYRIGHTS SIEPA. YEAR Standard regions: €2000- €5000 per every new job created (min 50 employees, €1m investment) Special and devastated regions: €4000- € per every new job created (min 50 employees, €0.5m investment) Large scale Investments: 17% of total investment value (€300m investment, 1000 employees) Up to 20% of total investment value (€50m investment, 300 employees) Direct Investment Incentives

Serbia Investment and Export Promotion Agency PRESENTATION RIGHTS RESERVED. COPYRIGHTS SIEPA. YEAR FDI origin by the Country

Serbia Investment and Export Promotion Agency PRESENTATION RIGHTS RESERVED. COPYRIGHTS SIEPA. YEAR Long tradition of vehicle production; Experienced and qualified labour available at competitive costs; University programs supporting the industry requirements; Government incentives target this sector; FIAT – the driving force behind big changes in the automotive sector in Serbia! Automotive Sector

SERBIA INVESTMENT AND EXPORT PROMOTION AGENCY 3, Vlajkoviceva St Belgrade, Serbia Phone: Fax: Serbia Investment and Export Promotion Agency